Mr. Speaker, I rise on a point of order. Discussions have taken place between all chief whips and there is agreement, pursuant to Standing Order 45(7), to re-defer the recorded division scheduled for 3 p.m. today on second reading of Bill C-54 until the end of government orders today.

Madam Speaker, it is a pleasure to rise today to speak to Bill C-54, an act to amend the federal-provincial fiscal arrangements with regard to equalization payments.

From the debate in the House today, we all know that the equalization program is an essential component of fiscal arrangements in Canada and it needs to be strengthened to fulfill its constitutional mandate.

The growing fiscal imbalance between the federal government and the provinces and territories raises concerns over the adequacy of fiscal arrangements between the different levels of government.

The equalization program enables all regions to offer more comparable levels of public services and narrows the differences in tax burdens for Canadians across the country. It is certainly not simply the NDP that believes this. In fact, this is entrenched in the Constitution.

The importance of equalization has been acknowledged in subsection 36(2) of the Constitution Act, 1982. It stipulates:

Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.

This is a critical part of our Constitution. It is certainly a critical part that regions like the one I come from, Atlantic Canada, hold onto and believe in deeply.

In its current structure, the equalization program is becoming more inadequate in its ability to achieve these constitutional commitments. Since the beginning of the nineties, equalization entitlements have been declining as a proportion of GDP while fiscal disparities in Canada have not been significantly reduced.

I would like to focus on the concept of adequacy and equity in this program of equalization.

I had a chance to look at the Finance Canada website recently, under transfers to provinces. I worked with the figures that were posted, showing total major transfers by provinces for the years 2000-01 to 2003-04.

Numbers are not necessarily my forte, but I do have access to a Radio Shack calculator. After crunching a few numbers from the Finance Canada website, I found some pretty disturbing things.

The website starts off telling us that between 2000-01 and 2003-04, total major transfers from the federal government to the provinces, mainly equalization and CHST, increased from $42.8 billion to $49.2 billion. That is an increase of almost 15% in just three years. That sounds good. The trouble is that not every province managed to get a seat on the gravy train.

For New Brunswick, total major transfers over the three year period increased, not 15% but a mere 3.6%. For Prince Edward Island, the increase was only 1.6%.

However, even those two provinces were better off than Newfoundland and Labrador and Nova Scotia. Unlike P.E.I. and New Brunswick, Nova Scotia and Newfoundland and Labrador have some revenue from offshore oil and gas. Instead of getting a minor increase in major transfers, they got a major decrease in major transfers. Nova Scotia's transfers dropped 1.3%. Newfoundland and Labrador's dropped more than 10 times that, at 14%.

For the Atlantic region, overall total major transfers from the federal government dropped by 3.3%, from 2001 to 2004, for a total decrease of $200 million. For the country as a whole, total major transfers from the federal government to the provinces increased by 15%, or more than $5 billion.

The Atlantic region is the poorest part of the country. It has the highest rates of unemployment, taxation, and post-secondary tuition, and the lowest per capita rate of expenditure on social programs. For this region, major federal transfers dropped by 3.3%, or about $200 million. There is something wrong with this picture.

If the purpose of these federal transfer programs is to provide a level playing field for Canadians from coast to coast to coast, why are the poorest provinces being cut back before they get anywhere near that level playing field?

Under our Constitution, Canadians have the right to reasonably comparable levels of public services at reasonably comparable levels of taxation. It is time the government started taking the constitutional obligations seriously.

The NDP is calling on the government not only to forgive the census related costs it has calculated in the recent census measurements but to accept a great deal of the responsibility for those losses. We are asking the government to work with Nova Scotians to make the province again a place that will sustain families and their hope for a better life.

We found out recently, this week in fact, that another funding crisis is hitting Nova Scotia's health care system. It is in the form of the largest health care district, the capital district health authority, being forced to cancel overtime for nurses.

Despite the difficulties our province is having in paying for our health care services, education services and what I have just been talking about, the Liberal government is threatening to claw back over $80 million in equalization payments based on the recent census figures.

It took the federal government nearly seven years to realize that its failed economic development programs were forcing young Atlantic Canadians to leave. Its first response was not to determine what went wrong. Its first response was to demand money back. That is an astounding thing to me.

Changes in the employment insurance program meant fewer people could earn a living in Nova Scotia through seasonal employment. The federal government could have fixed that. Instead, it chose not to. A lot of people went down the road.

Cuts to funding for education and health care through the CHST have sent more people down the road. The incredible cost of post-secondary education in my part of the country has made it impossible for young people to carry those debts. Again, we have seen a decrease in our population due to the government's punitive economic measures. We are now being asked to pay back money that in fact is not coming our way.

The offshore oil and gas industry was supposed to be a saviour for Atlantic Canadians, a cash cow like the one Albertans have enjoyed for many years. However, the promise of increased revenue from our offshore has not come true and there are no signs that it will ever be a viable industry that will provide a great deal of revenue for our province.

The Nova Scotia offshore accord, signed by the province and the federal government, was supposed to provide an equalization holiday for Nova Scotia once oil and gas started flowing.

Unfortunately, the accord was signed and came into effect before the member for LaSalle—Émard brought in his infamous 1995 budget which dropped the Canada assistance plan for the new Canada health and social transfer and put in a new set of rules for the provinces. In addition, the transition period for offshore revenues was only set for 10 years. It runs out this year. I know our colleagues from Newfoundland and Labrador also face difficulties with revenue earned from the offshore and its impact on equalization payments.

Although it is not actually a part of equalization, under the CHST brought in by the member for LaSalle—Émard, health care funding to provinces is inequitable. It is based only on population, not on need.

The provinces with the lowest overall levels of health get the same level of money for health care per person as provinces with much healthier populations. For the Atlantic provinces, it is a double edged sword. Failed economic policies mean younger, healthier people are leaving our region, as I already mentioned. The result is an aging population in poor health which means we have higher health care costs per person.

Everyone in the House should be aware that a low socio-economic standing poorly affects health outcomes. Poorer provinces automatically have higher health care needs to offset that. The current Canada health and social transfer does not reflect that reality and the new separate transfer for health is based on previous spending. Again, it is not on need.

In conclusion, I want to emphasize that we need to review how equalization payments are calculated so that they can truly be a tool for poorer provinces to provide a comparable level of care to that of our wealthier neighbours. We should not wait for another year and force provinces to scramble around to meet their budget priorities with such a flawed agreement.

We need an equalization program that treats provinces equally, that treats all citizens across this country equally, and that does not punish a province for the results of the federal programs that have been very hard on many of our provinces.

Mr. Speaker, I am pleased to rise to speak about Bill C-54. I congratulate all my colleagues who spoke before me.

Where is democracy heading in Canada? That is a question I would like to ask every member in this House, and all those who are listening to us or watching us on TV. More and more, we wonder where democracy is heading in Canada.

The current Parliamentary Secretary to the Minister of Finance has been asking ambiguous questions since the beginning of our exchanges on Bill C-54. The Bloc Quebecois is against the principle of Bill C-54 and its position did not come out of a magician's hat. We will try to have the bill amended so that, should there be an agreement between the provinces and the federal government on a new formula by March 31, 2004, such an agreement would take precedence with regard to payments to the provinces.

The Bloc Quebecois' position is based on the consensus of the provinces. I did not come up with that consensus since I am not here representing provincial governments. The provinces do not want to have an equalization formula, one that no longer reflects the current realities of their citizens, rammed down their throats

The provinces agreed to sing from the same songbook as the Government of Quebec to present their demands to this government. As you know, there was a general election in Quebec and the nasty separatists are no longer in power. A Liberal government is now at the helm in Quebec. Will the Parliamentary Secretary to the Minister of Finance understand that? They are his people.

The Liberal MNAs are opposed to the approach of this government, their federal big brother. We have always been told that the Bloc was a branch of the Parti Quebecois. Now the government's provincial brothers are opposed to what it is doing on the issue of equalization.

The Bloc takes as a basis the fact that the provinces are demanding that the formula be modified to take into account the fiscal capacity of all 10 provinces of Canada. I do not know whether the parliamentary secretary knows what fiscal capacity means. I am not talking about Quebec only, I am talking about a consensus among the provinces on the formula proposed by Quebec. The provinces want this to be factored in.

Such a measure would cost the federal government $3 billion more a year. The federal government is opposed to it, because it does not have the money.

A few days ago, and all the members of his party applauded, the Minister of Finance told us there was a surplus of $7 billion, yet when he tabled his estimates, he talked about a $3 billion surplus.

We are not talking about a few coins in his piggy bank. I doubt you have a piggy bank large enough to contain $7 billion, Mr. Speaker. If so, you would be an exception to the rule.

The Minister of Finance said there was a $7 billion surplus. The current equalization formula needs to be reviewed and adjusted to the current reality.

This is done for the next five years and has to be adjusted to the reality in the provinces.

My colleague from Laurentides talked about how her area had been hard hit when the Boisbriand plant closed. My are has been suffering from the softwood lumber crisis. The Sherbrooke area has other problems. In my riding, Alcan has just become the top aluminum producer in the world, but we have the highest unemployment rate in Canada. Why? What do we do with our raw materials? We ship them off elsewhere; we do not process anything.

The same scenario is found in all the regions in Quebec. That said, the provinces are saying, “Enough is enough. You base your statistics on the rich provinces, but we are no longer rich. We want to renegotiate with you and come to the table. We have the time”.

March 31, 2004 is five months away, after all. I do not know what the member for LaSalle—Émard is up to behind the curtain of the House of Commons or behind his desk with his friends, the big contributors to his campaign fund.

If thre is good will, everyone can sit down in five months, particularly since there is consensus among the provinces. They will not arrive with the intention of squabbling. No, they have informed the government of their conditions.

I congratulate them, because they always describe federal-provincial discussions as constantly having one participant who is not in agreement. But this time they all reached agreement in advance and have told the feds, “It is your turn now to listen to us”.

We are part of that consensus, and we are telling the federal government, “Sit down and negotiate instead of having the pipe dream that everything is fine, that this is the greatest place in the world”.

No, there are regional and provincial inequities. This applies regardless of what is concerned, poverty for instance. Let them stop pretending otherwise: we have the highest percentage of children living in poverty, according to UN statistics. When I heard that, I thought of our present prime minster boasting about how we were the richest country in the OECD.

This then is the consensus, and we will support it. The parliamentary secretary, the present PM, the member for LaSalle—Émard and future PM behind the curtain, the present Minister of Finance, all want to shove something down our throats that we will not swallow. We are going to oppose it, because doing so makes sense.

During the election campaign, we do not want to hear them talking about “the Bloc Quebecois members who were against it”. They did that in 2000, claiming we were opposed to the infrastructure program. This is not true. What we said was that it was not big enough.

That is the situation. Let them negotiate. Afterward, if things go well, we will vote in favour.

These are all phrases we can use. This is sad. As individuals involved in politics, as representatives elected by the people, we would normally expect to come and do some serious work in this House and not to be stuck here for months, watching time go by until a new government can take over. That is nonsense.

Some people somewhere in government have to consider Canada's image. I am the foreign affairs critic. Canada, which boasts about its reputation, is doing itself serious harm. It is being observed. It is putting itself on the map, so people are watching. The current situation in no way demonstrates good governance or transparency. Not at all. This is serious.

That is why we want this bill to be defeated. However, we still have one hope, and that hope has just been introduced. We are telling the House how we feel. If, in response to our amendments, the government responds to our fears, we might change our minds. However, if things remain unchanged, including the text of the bill, we can only be angry at what is before us.

Bill C-54 bears a number with a past. This was the number of the so-called Internet transaction bill, which infringed on Quebec's jurisdiction. This was long debated. As things currently stand, if Bill C-54 is not amended, we will strongly oppose it.

Mr. Speaker, this bill has four clauses and they are not very long. The problem is that the Bloc has failed again to read the bill.

The issue here is an insurance policy with regard to equalization. It is to ensure that in the unlikely event that we do not have an agreement by March 31 that the payments to the provinces, including Quebec, will continue to flow.

We talk about sincerity. If the Bloc members were really sincere, they would realize that the government did not cut equalization even during program review. This has been a cornerstone of the government.

We have had a successful meeting between the Minister of Finance and his provincial counterparts on October 10.

The member for Niagara Centre understands the bill completely which is why he supports it. He does not understand why there is a problem and I do not understand either.

The fact is that it is insurance. The discussions are ongoing and if Bloc members have any valid issues with regard to equalization, that is fine. However, this is not the bill dealing with that. It is simply dealing with insurance.

However, Bloc members will stand up on April 16 and scream if money is not flowing to Quebec because they did not support this insurance policy which is Bill C-54.

I know it is hard, but could we stick to the issue? If Bloc members want to talk about something else, they can do it at another time.

I would like to ask the member, if we do not have an insurance policy in place, is she going to say to the House that it is fine, no money to Quebec? Obviously not.

Bryon WilfertLiberalParliamentary Secretary to the Minister of Finance

Mr. Speaker, clearly that member and the Bloc have not read the bill. The bill has nothing to do with the issue he has raised. This is an insurance policy. Currently, the Minister of Finance is meeting with his counterparts. As members know, they met on October 10, they are continuing these discussions and they will meet again.

As far as what will happen in the future, that is something we are anxious to resolve. Obviously, by March 31 we want to have the agreement in place. However, in the unlikely event that we do not have an agreement, this insurance policy will ensure that moneys continue to flow to Quebec and the other seven provinces.

The fact is, without this legislation, there will be no money, and I am sure that member will have the audacity on April 16 to stand and say “Where is the money?” There is no money because his party is holding up Bill C-54. We need to have this in place as an insurance policy.

We have two tracks here. One track is negotiating with the provincial governments. The meetings have gone very well, and I again emphasize that.

If we do not have an agreement at the end of March, although unlikely, I assume that member would support insurance just as he would on his house or his car? He gets it not because he hopes he will have to cash it in, but for protection.

Mr. Speaker, I thank my colleague, the member for Jonquière, for her question.

Naturally, we all realize that, if Bill C-54 is being rushed through the House, it is because the Liberal government has decided to adjourn the House; that means we will soon be on a break until the next election. This is all due to the fact that one man has decided to call an election, the member for LaSalle—Émard, as leader of the Liberal Party, next spring, in 2004.

Of course, in the meantime, the member for LaSalle—Émard has no intention of coming here to answer questions that we could ask in the House, about equalization for example, to find out about his position on the new way of distributing equalization payments among the provinces in Canada.

Since it is quite possible that the House will not have time to sit or adopt a new equalization policy, the government is simply extending the former policy, which was supposed to expire next spring.

The government is really not taking any chances: it is extending the policy without consulting the provinces. This is the part that is hard to accept, because this is only one of many similar cases. I will not list all the disasters that have happened in this Parliament over the last few weeks; I know the journalists are taking care of that.

The truth is, however, that it is hard for members from Quebec, like my hon. colleague from Jonquière, my hon. colleague from Charlevoix, my hon. colleague from Laurentides and my hon. colleague from Sherbrooke to protect the interests of Quebec when, every time we are about to address an issue, the government introduces a bill and tries to ram it through the House in order to avoid any discussion and especially to avoid any question being put to the next leader of the Liberal government.

That is the grim reality. These days, we discuss things with members, ministers and a Prime Minister who no longer have any power, who can tell us whatever they want, knowing full well that the member for LaSalle—Émard has publicly said that he would review all the decisions made by the current government.

How can we talk about equalization with the finance minister when the hon. member for LaSalle—Émard has stated that he would review all the decisions made by the current government?

So, it is not easy. This is why we oppose Bill C-54. It is not that we are against equalization, but we do not like the fact that the provinces were not consulted beforehand and that we cannot put questions to the member who will be running the next government.

Mr. Speaker, I must first inform you that I will be sharing my time with the hon. member for Laurentides.

It is my pleasure to rise to speak to Bill C-54 to extend the Federal-Provincial Fiscal Arrangements Act. Of course, this bill extends the period during which equalization payments may be made. When we hear this word, it sounds very complex. What is the formula? On what basis is the distribution made? There is a whole lot of discussion about that.

Oddly enough, before the last election in Quebec, there was less money for equalization. After the election, the money started coming in. Some will say it was unintentional. Personally, I would say that the timing was perfect. That is the name of the game. There is always a dilemma with respect to equalization. Why? Because this is the way Canada, and the federal government in particular, has decided to redistribute wealth throughout the country.

Redistribution of wealth means that some provinces receive equalization payments while others receive nothing. Quebec is a recipient province. I long for the day when Quebec will no longer be a recipient. The reason is simple: to receive equalization is an indication of a flagging economy. It is true that unemployment is higher in Quebec than elsewhere. Take for example the GM plant in Boisbriand, which closed down. This closure affects the ridings of my hon. colleagues from Rivière-des-Mille-Îles and Laurentides as well as my riding of Argenteuil—Papineau—Mirabel. This is a fine example of distribution of wealth across the country. All the automobile manufacturing is in Ontario. But all the raw material is in Quebec. That is how wealth is distributed.

In order to reach that balance at the end of the year, the federal government decided to redistribute money. Some provinces have more money than others. Ontario does not receive any equalization payment because it has big companies, big manufacturing plants and big car plants. We have none. We have to be content with some small parts plants. And yet Quebec is one of the biggest producers of aluminum and magnesium in the world. These products are used to build cars, but they are no longer built in Quebec. There are no more plants. The Liberal government chose to close the Boisbriand GM plant. That is a fact.

The other way to try to reach a certain balance is to redistribute wealth through equalization payments. Today with Bill C-54 the government is renewing the way equalization payments are calculated. As we know, there is a lot of debate and discussion on how they are calculated. There were discussions when the Parti Quebecois was in power in Quebec. The debate is still going on. Questions are being asked by the Liberal government now in power in Quebec. Other provinces are asking questions too. They want to review the way these infamous equalization payments are calculated.

Without warning, the government has decided to renew the agreement in this respect because the House might not be sitting before the existing legislation expires. Today the government is rushing through an extension without discussing the principle of equalization. That is a fact. It will not be discussed because there is no time. A system that is challenged by every province is going to be extended.

Why is it challenged? I will give one example. Because, among other things, in order calculating the average, the richest provinces are not taken into account. The wealth of the richest provinces is not assessed to determine which are the poorest and which ones must benefit the most. They are taken out of the equation. Only some provinces enter into the calculation. I will tell you which ones later. These provinces are used to calculate, among others, equalization payments.

You will understand that to redistribute wealth one should be able to put in the balance the richest provinces and the poorest provinces. One should give to the poorest ones and take a little bit more from the richest ones. That is a fact.

By taking a little more from the wealthy, I mean taking more money from the federal government and giving more to the poorest. Anyway, the wealthy will not get any. If we were calculating this way, it would cost the federal government $3 billion more.

This is why the calculations are still done using the old system because they do not want to redistribute wealth according to the newly established formula. I have made this comparison because it is not easy to understand for those who are listening to us. They are not all administering provinces.

Let us look, for example, at the old age pensions and the way the government calculates the increase in the cost of living. The cost of living corresponds to the average family cost of living. Do not tell me that the cost of living is the same for the elderly as it is for the average family. They do not have the same eating and the same driving habits. However, their housing and drug costs are much higher for them than for the average family.

Thus, when the Canadian government increases the amount of the old age pension, it uses the traditional formula. It does the same thing when redistributing the money among the provinces. Provinces are now asking that the redistribution be according to a new formula, and seniors from Quebec and Canada should ask the same thing, to ensure that the government is not calculating the increases according to an average family cost of living.

In recent years, the cost of living for seniors has risen drastically. That is the reality. What is the reason for this? The cost of housing has gone up a great deal, and prescriptions cost more as well, while food and transportation are down.

Governments benefit from this. One example: the Old Age Pension, which is pegged to the cost of living. In some quarters of the past year, no increases have been necessary, because the average cost of living has not gone up. There is to be a small increase coming up shortly, but it is still less.

For these reasons, the distribution of wealth needs to be reconsidered. Discussions must be reopened on how the wealth is shared with seniors, so as to bring their pensions into line with actual accommodation and health care costs.

The same thing goes for the provinces. Equalization payments must be increased so that the poorest provinces, those with less resources, can benefit more, which is the principle behind equalization payments. Provinces with fewer resources ought to benefit more from the equalization system than the extremely rich ones.

Everyone must be included. We must not do as the Liberal government has done in its calculations for equalization: take just a handful of provinces and do an average. They use Quebec, Ontario, Manitoba, Saskatchewan and British Columbia.

The others are excluded, purely and simply because they are sometimes too rich. Thus calculations for the equalization payments are simplified. To repeat, if true wealth were calculated, that is all the resources of the richest provinces compared to those that have the least, there would be $3 billion more in equalization payments to the poorest provinces.

Quebec and some others would benefit, most definitely. Hon. members will understand why the potential recipients complain about the way the calculation is being done.

In conclusion, the Bloc Quebecois is opposed to Bill C-54, but not to the principle of equalization payments. We are opposed to the fact that it is being brought up at the last minute, without any discussions with the provinces, the ones concerned by the system of equalization payments.

Don BoudriaLiberalMinister of State and Leader of the Government in the House of Commons

Mr. Speaker, this afternoon we will return to consideration of Bill C-32, the Criminal Code amendments, followed by Bill C-54. If we get through this, we will proceed to consideration of Bills C-19 and C-6, two bills on first nations. If we have time, we will also look at Bill C-51.

If that is a bit too ambitious, the first item for consideration tomorrow will be Bill C-6, the specific claims legislation. After oral question period, we will come back to Bill C-54, which we debated this morning, concerning fiscal arrangements. If there is time, this will be followed by Bill C-46, the market fraud bill, and Bills C-19, on first nations, and S-13, concerning the Statistics Act.

Next week, we will continue to consider bills that have not been completed, beginning on Monday with Bill C-46, on financial institutions. We will add to that list Bill C-23, the sexual offenders legislation.

By mid-week, we hope to be in a position to consider Bill C-52, the radio communications bill, and Bill C-20, the child protection legislation, as mentioned by the Minister of Justice during oral question period.

Mr. Speaker, I am very pleased to speak to Bill C-54, an act to amend the federal-provincial fiscal arrangements, in order to ensure continuity in the equalization payments to Quebec and provinces that are entitled to receive them.

The equalization system in Canada is governed by legislation that usually lasts five years. The current legislation took effect on April 1, 1999 and will expire on March 31, 2004. Effective March 31, 2004, there will need to be new legislation on equalization that governs federal-provincial fiscal arrangements.

The federal government currently does not seem to want to respond favourably to the provinces' demands with respect to upcoming legislation to cover 2004 to 2009. In addition, for a reason that is hard to understand, the federal government is proposing a bill five months before the current legislation expires. Why introduce this bill today when it could do so in February 2004, should an agreement not be reached with the provinces?

The fact that the federal government is introducing this bill when the provinces and the federal government are still negotiating sends a rather offensive message to the provinces. Some very constructive suggestions for improving the legislation have been put on the table by the provinces. Some are political, while others are technical. We know that the equalization system is very complicated and that it has been a roller coaster ride for the provinces for the past few years.

Once it has been announced that the provinces will receive $500 million or $1 billion less, a few months later the numbers are recalculated and we are told that the provinces are entitled to $500 million or $1 billion more. This scenario creates unbearable confusion in the day to day management of provincial budgets. We would like to be able to correct this. The provinces also made proposals to improve the situation.

What we have before us is some kind of temporary legislation to cover this period of uncertainty about who is leading the government in the Parliament of Canada, because Canada currently has a two-headed government, with one head preparing to leave and the other anxious to take over as soon as possible but unable to do so. In the meantime, instead of resolving the situation and determining who is the head of the government who will be answering to the public, every trick in the book is being used not to offend the current Prime Minister, who is on his way out, and to give a fairly free hand to the next prime minister.

It so happens that this one-year extension will also cover the next election campaign and, consequently, place the provinces in a less favourable bargaining position to get what they want from the federal government. The Bloc Quebecois therefore intends not to support the principle of the bill.

We do not have anything against equalization per se, of course. I think that our equalization model has worked in the past. But it is not the best. I think that, ideally, Quebec should become a sovereign state and control 100% of its taxes and 100% of its revenues, so that it can be managed as a self-sufficient and mature state.

Until then, the equalization system in the Canadian context must be maintained. However, it should not be used the way it is currently being used by the federal government, and definitely not in the spirit in which this bill has been introduced.

We therefore cannot support the principle of Bill C-54, even though we support the principle of equalization. We will try to bring forward amendments so that, if an agreement on a new formula can be reached by March 31, 2004 between the provinces and the federal government, the new formula can be applied to payments made to the provinces.

The Bloc Quebecois will try to give back to the provinces the bargaining power the federal government is taking away from them. Indeed, it is taking the wind out their sails by declaring that it will be preserving the status quo for at least one more year. This way, the government is in no rush to negotiate with the provinces and does not need to act quickly to correct the situation.

We will try to amend the bill at committee.

As for our position, we shall see what happens when we get to third reading. We shall see where we are when the time comes to pass the bill. Apart from the future prime minister, hardly anyone wants to see this bill put through as soon as possible. We want time to be taken to allow the provinces to put forward their arguments. They also need to be able to gain some points, and the entire system needs to be improved so that we end up with the best equalization payment system possible.

It is not a matter of simply changing the law to please the potential PM, as we did with the effective date of the electoral map. The same logic applies here. The non-partisan electoral legislation called for the electoral map to take effect one year after its official recognition. The elections ought therefore to be held a year after the electoral map is adopted. The government decided to changethis and move the date to April 1, to suit the emperor in waiting.

So now they are doing the same thing with the bill on equalization payments. Democracy stands to lose as a result of what was done with the electoral map, but in this case it is fair treatment of the provinces that will lose out. I think the public will be able to judge this situation for itself.

The current legislation has another five months to run before it expires on March 31, 2004. Let us allow time for negotiation. As I said, this is one more demonstration of the paralysis that is setting in within the federal government. It seems that no one wants to shake it out of its paralysis.

On Tuesday, we had a votable motion in which the Bloc Quebecois called on the Prime Minister to step down as soon as possible. There are many within the Liberal majority who have been working for a long time to get the present PM to go, but that majority decided to vote in favour of his staying. Unfortunately for them, we have learned that our motion has had some impact on caucus and on the Liberals' discussions. At last, the Prime Minister is wondering whether he ought not to leave as soon as possible. He realizes that there are some major problems.

In practical applications, like the equalization program, we are dealing with the money that allows provinces to balance their budget. It is imperative that the best possible legislation be enacted. And for that, one needs time to negotiate.

For the sake of those who are not familiar with the notion, the purpose of equalization is to reduce horizontal gaps in the provinces' fiscal capacities. There are extremely complex mechanisms to determine how to do that. The basic principle is still to better balance the means of the provinces. Also, the federal government makes equalization payments according to some set mechanisms.

And then there are the demands from the provinces. I talked about that earlier. They should be the reason for the government's action today. Instead of putting forward this bill, the federal government should send a clear message to the public that it is trying to find the best possible equalization arrangement, that the finance minister is in contact with his provincial counterparts, that they are hopeful something positive will come out of it and that a bill taking those arrangements into account will be forthcoming.

That is not the message that is being sent by the finance minister and the federal government. The message we are getting is that they are trying to sweep the issue under the rug, gain one year, and by then the provinces will have no more leverage, and they will be able to get their way in any equalization agreement.

What the provinces are asking is first that the formula be changed to take into account the fiscal capacity of all ten provinces. Currently, it only takes into account the fiscal capacity of a sampling of provinces. It was realized that in actual facts this did not lead to the desired fairness. The formula proposed by the provinces would cost the federal government about $3 billion more a year. It is a lot of money, but that must be put into context. Last year, that same government had a $7 billion surplus .

In fact, for the sake of equity between Canadian provinces, would it not be better to allocate that supplementary $3 billion on an annual basis? It would help solve part of the fiscal imbalance across Canada. This interesting proposal was made by the provinces and other stakeholders at a press conference on October 9, 2003. It was made as they were preparing for the meeting of the federal provincial finance ministers. That meeting was held on October 10, 2003.

Although that meeting with the Minister of Finance did take place, now, even before the month of October has gone by, they are introducing a bill saying that the status quo will remain for one more year. Instead of showing some courage, instead of giving a clear answer to the provinces, the federal government has decided that it would put off dealing with the problem. I think such behaviour is totally inappropriate.

There is another provincial demand that even the federal government has to recognize. The review mechanism needs to be reviewed. As things stand now, it is very difficult for the provinces to know in advance what equalization payments they will be entitled to. Therefore, the provinces are asking that Ottawa make payments more predictable.

In our system, if there is one frustrating thing about managing a provincial budget, it is certainly suddenly finding out that an additional amount is forthcoming or not. That plays havoc with any attempt to balance the budget. If we were to make only one technical change in the agreements on equalization payments, this would surely be the one to make.

We are proposing that any adjustment linked to new statistics be automatically spread over a period of three to five years instead of being required in the year where statistical changes happen; that will reduce the volatility of the adjustments.

I would add that in case of a sudden increase or decrease in available moneys, it can also be frustrating to hear something like, “You have to give us $350 millions back, next year” for example, or, “You will receive $350 million more”.

This has happened to the Quebec government. It was difficult to maintain a balanced budget. We needed more money in health and suddenly, at the end of the fiscal year, we discovered that there was a substantial cushion we could have used during the whole year if only we had known.

Consequently, the people of Quebec did not benefit from the services they were entitled to, not because the Quebec government did not want them to have those services, but because it did not have the right information as to what its budget would be. It is important, therefore, that this be corrected.

We have learned through leaks that the federal government might be willing to agree to this request. If this is true, why not integrate it right away in this bill? Why not find a way to let it be known that this request would be accepted?This would show some good will on the part of the federal government. As far as I know, there is noting of the kind in the bill as written.

The provinces are also asking for a simplification of the program, because reaction to the word equalization itself is that this is something rather mysterious that calls for a lot of expertise. The fact is that the system is very complex system.

For example, there are about 3,000 variables used just to calculate transfers to the provinces. All this should be made more transparent. This is what the provinces have requested. In addition, it has been requested that all general revenues, and not just some of them, be included to better reflect the context within which the system operates.

We would also like some of the 33 sources of revenue currently used to determine the provincial fiscal capacities to be reviewed, particularly the tax-back effect, which can lead receiving provinces to be less interested in adopting measures to stimulate economic growth.

Indeed, when we learn after the fact that funds were available, those are resources that we could not anticipate, because people in the provinces are asking their governments to be prudent and to refrain from counting on revenues that they are not sure they will get. By correcting this situation, provinces will be able to do better.

This behaviour, also seen in the case of Bill C-54 on equalization, is another example of the paralysis now affecting the legislative process in Parliament. Another example is the fact that the government is supposed to bring down a budget in February. The Minister of Finance himself says that he cannot prepare his budget without knowing what the prime minister wants to do. The same thing is true of equalization.

The prime minister in waiting has said, “I reserve the right to review every single government decision”. Thus, the proposal before us reflects that clearly: this bill provides the minimum to the provinces—maintaining the status quo—but it does not correct the legislation. This is another way of saying, “We will see what happens when the new prime minister comes in”. Nevertheless, this bill says nothing about day to day management, the mechanisms that have to be changed, and the recommendations that have been approved, and that should be there.

In my opinion, it would be more responsible to say that we are against this bill because the equalization system must be improved, rather than introducing it as it is, saying that it will be in force for a year, and that later on we will see if there are changes resulting from negotiations with the provinces.

On the one hand, it is an authoritarian and somewhat centralizing behaviour to say, “We will introduce a bill that maintains the status quo, but we do not feel obliged to negotiate improvements before the bill is passed. As the federal government, we are taking out an insurance policy that will enable us to keep operating”.

On the other hand, however, the provinces are given no guarantees that they will be able to obtain some of the improvements they believe are necessary. The federal government shows no signs of the spirit of compromise that would be necessary for such a bill.

As things stand, the Bloc Quebecois cannot vote in favour of this bill at third reading unless, in the end, we see improvements that will satisfy the provinces. Let us take the time to include these improvements. There is no urgent need to adopt this bill in its current form.

Obviously, it is very important that equalization continue, but in order to achieve that, we have the time to do good work, to achieve a satisfactory result, to include appropriate measures in the bill, and to integrate what the federal government is ready to accept as a result of negotiations with the provinces, and which is not there at present.

This is the kind of behaviour on the part of the federal government that exasperates the provinces. If the future prime minister wanted to prove that things are going to be different in the future, that he will not be a Liberal like the rest, that he will not take a centralizing approach like the others, this would have been the perfect opportunity to demonstrate that by taking a different approach here, but this does not appear to be the case.

When it comes to the resolving the fiscal imbalance, improving the equalization program or finding a way to regulate federal spending powers, the current government has done nothing to show that things will be done differently in the future.

Since our party is here to defend Quebec's interests and wishes, like all the other provinces, and since we want Quebec to get its rightful share and ensure the fairest possible system as long as we are part of the federal system, we feel it would be irresponsible to support this bill in its current form only to be told in two or three months, “You agreed to it” or to hear, during the next election campaign, “You voted in support of the bill as it stood and that should suffice. Why are you asking for more?”

In my opinion, the public needs to hear this. People should also understand that equalization is working. However, it must be based on the year in progress and on a functional model that will be operational and that will take into consideration the demands of the provinces. When this has been done and when these changes have been made, we will be able to adopt legislation that meets the requirements of Quebec, the provinces and the federal government.

In the event that no agreement is reached and a bill remains necessary to ensure continuity, there will always be time to obtain the Bloc's cooperation. In the meantime, however, there is no question of adopting such legislation.

The principle of this bill, as drafted, is to recognize the status quo, which is not what people want. I know that Quebeckers will support the Bloc Quebecois, as we are speaking on their behalf here.

Mr. Speaker, we have before us Bill C-54, the purpose of which is to extend the Federal-Provincial Fiscal Arrangements Act.

As mentioned by the previous speaker, this bill must be put in the current context, that of an extremely difficult transfer of power between the current PM and the future PM, the member for LaSalle—Émard. This bill is before us today only because the Liberal Party of Canada wants to retain the whole array of instruments needed to manage this difficult transition without having to come back to Parliament, so that it can close down the House whenever it sees fit.

As the Bloc Quebecois and its leader have said over and over again, we believe that this House must keep on sitting no matter how difficult this transition is, and that this bill is premature. There are still five months left before the current equalization payment formula expires. At their last meeting, on October 10, the provincial finance ministers and their federal counterpart said that they would do everything in their power to reach an agreement by March 31.

Why put forward a bill extending arrangements dating back to 1999 that are full of holes? These flaws have been condemned by every single province, in particlar by the current government of Quebec. They were also severely criticized by the Séguin commission on fiscal imbalance created by the premier of the day, Bernard Landry.

Why this bill now? Not because the provinces want to reach an agreement with the federal government. Not for lack of time to find a solution. It is because, for partisan reasons, the Liberal Party does not want to have its hands tied in the context of the difficult transition between the current PM and the future PM, the member for LaSalle—Émard.

That is why the Bloc Quebecois put forward a motion asking the current Prime Minister to relinquish power shortly after the Liberal Party convention to avoid this sort of situation, where a bill which is totally uncalled for at this time is being introduced prematurely.

Everybody will understand perfectly that the Bloc Quebecois does not disagree with the fact that, in the end, if negotiations between the provinces, Quebec and the federal government are not satisfactory, a bill can be introduced to extend the present agreement for a year in order complete the negotiations.

However, the presumption behind this bill is that there will be no agreement. We are making this presumption even though, on October 10, the provincial ministers of finance and their federal counterpart said that they would negotiate in good faith and hopefully would reach an agreement before March 31, 2004. Therefore, The presumption is that no agreement will be reached before that date, not for lack of good faith on everybody's part, but because, for a certain period, this government will not be able to conclude agreements with the provinces. This is because the one person who is really leading the government is not here to be held accountable, but is nonetheless pulling the strings.

We cannot approve that approach. We think that, with five months ahead of us to negotiate and the good will showed by all parties, an agreement can be reached, especially if the present Prime Minister bows out soon after the convention of the Liberal Party of Canada. It would appear that, at the Liberal caucus meeting yesterday, he sort of hinted that it was a possibility. However, we cannot approve the current paralysis by supporting the bill before us.

As I said, we hope to sit with the new PM, the next leader of the Liberal Party of Canada, during the winter session. We would like to be able to exert pressure on that leader and this government so that an agreement can be reached on a equalization formula that will be more equitable for the provinces.

At this stage, we cannot support Bill C-54 in its present form, not because we will not have to eventually renew the existing arrangements, but because this bill is premature. Supporting it would be like approving the present paralysis of this Parliament and co-operating with the Liberal Party of Canada and the government who want to find a way to suspend the sittings of the House until an eventual throne speech followed by an election.

The Bloc Quebecois will vote against this bill on second reading. We hope to improve it so that we have all the leeway we need to reach an agreement before March 31 and submit to the House the new agreement on equalization we are hoping for. We will reserve our decision on the position we will take on third reading.

It is important to remind the House that equalization is a very important tool for the provinces and especially for Quebec. That cannot be denied. The situation we are in is extremely strange, with what we call the fiscal imbalance, in which 60% of Quebeckers' tax dollars end up in Ottawa. This money then has to be transferred back to Quebec and other provinces through programs like the Canadian Health and Social Transfer and the equalization formula, when it would be so simple to let the provinces, and Quebec in particular, have the tax base they need to carry out all their responsibilities.

Clearly, in these circumstances, we will have to improve the existing equalization formula, which distributes the tax burden equally among all the provinces. Ottawa spends about $10 or $11 billion annually on equalization, a relatively modest sum, I would say. Even if it appears to be a fairly large amount of money, it is only between 1 and 1.3% of the gross domestic product. While not a lot, it is nonetheless helping those provinces who do not have a large enough tax base to provide a number of services.

However, and this has already been pointed out by the hon. member for Drummond, among others, the current equalization formula is not satisfactory. Therefore, extending it in advance, immediately, presuming that there will be no agreement before March 31, simply condemns Quebec, for example, to lower revenues in the coming year than in the current year. That is quite abnormal in Quebec public finances, as we know.

Moreover, Quebec's is not a unique situation. At present, nine of the ten provinces, all but Alberta, are in financial trouble. Strangely enough, we are being told that the cumulative deficit of all the provinces for the coming year will be about $10 billion. In a way, if the $10 billion that goes through the federal government had gone directly into the provincial treasuries, we would have avoided this money-shuffling game.

That said, the rules being what they are, the equalization formula must be improved. As I was saying, the current formula means that the Government of Quebec will have less money next year than this year, and this at a time when Quebec's finance minister has announced a financial shortfall of nearly $3 billion. I remind the House that if the Government of Quebec does not want to tamper with health and education, there will only be an envelope of $9 billion in which to find that $3 billion. It is utterly impossible.

In the current situation, federal government transfer payments for health and education are inadequate, after the deep cuts we suffered during the war on inflation. Thus, neither transfer payments nor the current form of equalization can help the Government of Quebec fulfil its obligations in health and education. It has no choice. If it wants to balance the budget next year, the Government of Quebec will have to make come cuts in health and education. It cannot find $3 billion out of $9 billion—it cannot. It is impossible. The whole issue of fiscal imbalance is illustrated by this situation.

The current equalization payment is a significant transfer for all the provinces, except Ontario and Alberta. The equalization payment is a significant transfer for Quebec. The fact remains that a certain number of problems have been identified by the Séguin commission, the Government of Quebec, and the provinces.

For instance, there is the fact that the standard being used is based on the situation in five provinces, not all ten. The extremes are excluded, in other words, the Atlantic provinces because they are not wealthy enough, and Alberta because it is too wealthy.

This situation ends up penalizing Quebec, in particular, and other provinces as well. We agree with the provinces, the Government of Quebec and the Séguin commission that the new equalization formula should take into account the per capita fiscal capacity of all ten Canadian provinces, including Quebec, Alberta and the Atlantic provinces, as I mentioned.

The second problem identified by the Séguin commission, the Government of Quebec and all the provincial governments, concerns the equalization ceiling. In 1999, for the last formula that will expire in March 2004, the ceiling was arbitrarily set at $10 billion and indexed each year to nominal GDP.

The ceiling was fully applied only in 2000-01. This denied the provinces entitled to equalization a sum of $224 million. Knowing the provinces' situation with respect to public funding, it is safe to say that money would have been extremely helpful.

The way the cuts are distributed also disadvantages Quebec, because it is done in proportion to the entitlements of each province, and is not based on demographics. That said, when there are cuts to be made, Quebec assumes 62% of the cuts, yet we represent 24% to 25% of the population.

It is therefore extremely important to us that the ceiling on equalization be lifted to ensure there are no shortfalls to the provinces and Quebec.

Another element that is extremely important to the Séguin commission, the Government of Quebec and the provinces, is the tax base used to determine equalization entitlements. At present, these are poorly defined. We know that they are calculated based on 33 tax bases, including property tax. This is a serious problem for Quebec, since the federal government arbitrarily decided to measure fiscal capacity taking into account the income of owners, and not property value.

Common sense would dictate that, when looking at a tax base like property tax, one would look at the value of the property or buildings, and not the income of the owners who live in them. This anomaly results in Quebec's fiscal capacity being overestimated. Consequently, Quebec is being deprived of $800 million.

The gap between the fiscal capacity of the provinces and the average is currently 22%, while the gap based on property values is 35.5%. This too needs to be corrected.

As I indicated previously in a question, the provinces are asking, as the Séguin commission and the Government of Quebec did, that Ottawa make payments much more predictable. There are a number of statistics involved. In fact, some 3,000 figures are used to calculate equalization. It would need to be much more transparent. Also, whenever there are changes in these figures, these changes should not be applied to the current year or retroactively, but rather over a period of three to five years.

In practice, the federal government always ends up spreading the repayment or cut required over several years. But even then, only after strenuous negotiations. There is always blackmail involved on the part of the federal government, which starts off by saying, “You will have to pay”, but, under pressure from the opposition, the Bloc Quebecois, the provinces and the public at large, eventually makes arrangements.

It would be better for everyone if the rules were clear and if the amended equalization amounts, based on a statistical variation, were spread over three to five years so that the provincial finance ministers, in their budgets, would not have to deal with unexpected clawbacks or changes to the transfer payment amounts under the formula. As I mentioned, all the provinces have reached consensus on these demands.

Under the formula proposed by the provinces, the fiscal capacity of all ten provinces, instead of five, would be taken into account. However, this would cost the federal government $3 billion.

Obviously, the Minister of Finance is saying that this is impossible. This week, to everyone's surprise, he announced a technical deficit, a new invention of the Department of Finance. This tactic has already been used to hide any surplus. First, as you will remember, a $3 billion contingency reserve was created. Since that did not do the trick, the current Minister of Finance invented a new category called economic prudence.

When he was asked in the House to explain the difference between the contingency reserve and a reserve for economic prudence, he could not, because there is none. That side is merely playing with numbers to avoid having to reveal the actual surplus and is hiding the true state of federal finances from the public, as well as the fact that the federal government is able to meet the provinces' demands, for example, that the fiscal capacity of all ten provinces, not five, be calculated.

I would remind hon. members that, for the fiscal year ending in March 2003, the Minister of Finance was talking about a $3 billion surplus just weeks ago. Three weeks later, oddly enough, the surplus had reached $7 billion. It is rather disquieting that the finance minister cannot estimate the amount of surplus at the same amount on two occasions only weeks apart. This is an error of 133%. Hon. members might say this is a trifle compared to last year, and they would be right. In 2001-02, the then finance minister, now member for LaSalle—Émard, and prime minister to be, was 493% off. So this year is somewhat of an improvement.

Oddly enough, the Bloc Quebecois, with its meagre means, is able year in and year out to predict the surplus within about 10%. In the past four years, we have never been more than 10% off.

So the Liberal government is employing a strategy to camouflage the true condition of public finances by underestimating the surplus—their past tactic was to underestimate the deficit, now they overestimate the surplus—in order to make the public think they do not have the money. But they do.

For example, for the coming year, the Minister of Finance tells us he is already in a technical deficit. This is something new he has come up with. His technical deficit means in fact that his surplus will not be as large as projected. Instead of three or four billion, it will be something less.

There will in all probability be a surplus. I am even convinced that it will be three or four billion. This surplus is, however, not called a surplus any more; now they call it a technical deficit. This is just smoke and mirrors. Fortunately, fewer and fewer people in Quebec and Canada are buying that story.

With our calculator and our very simple model, we did a rough estimation of what the surplus will be for the current year. We believe that the government will easily end up with a $6 billion to $7 billion surplus. This means that there is more than enough room to follow up on the provinces' request and increase the tax base so that equalization payments better reflect the actual fiscal capacity per capita of each province--and we are talking here about $3 billion--and to commit immediately to transferring the $2 billion provided for in the health agreement.

This is the $2 billion that has been used shamelessly for blackmail over the last few weeks. We know that the government will have enough money to address the provinces' concerns with regard to equalization payments and health transfers.

We have five months ahead of us. I am asking the federal government and the Minister of Finance to undertake negotiations in good faith, as requested by the provinces and by Quebec, to find a solution as quickly as possible. We have the money and we can do it.

If the future prime minister wants to take part in these negotiations, it is fine with me, but we do not want to hear about an extension of fiscal arrangements. We know full well that this will take away all the pressure to negotiate on the part of the federal government, and we will probably end up, in the spring of 2005, with another extension or with an arrangement that is not satisfactory.

If they negotiate in good faith, they can find a solution to this problem and, as I was saying at the beginning of my remarks, this is why we will be voting against this bill at second reading, hoping that we can amend it in committee to take into account all the elements that I just mentioned, and then be able to vote in favour of this principle at third reading.

Mr. Speaker, I am pleased to take part in the debate this morning on Bill C-54, the issue of equalization.

The bill would extend the equalization program for one year until March 31, 2005. I will begin by giving some background information to our viewing audience.

The equalization program helps provincial governments offer comparable levels of service at comparable levels of taxation, that is in theory. Payments are guaranteed under the Constitution Act of 1982.

Parliament and the Government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonable and comparable levels of public service at reasonable and comparable levels of taxation, that is in theory.

What we have today are eight provinces receiving approximately $10.5 billion per year. The payments are unconditional. The money may be spent according to provincial priorities.

Payments are based on a comprehensive formula that measures the ability of each province to raise revenue against the per capita average of five provinces: Ontario, Quebec, Manitoba, Saskatchewan and British Columbia. The formula includes revenues from several sources, including resource taxes, sales taxes, payroll taxes, fuel taxes, property taxes, user fees and gaming revenues. Changes to the formula would be made through regulations. The program will expire on March 31, 2004, unless Parliament renews the date.

The government does not expect to be in a position to present a package of detailed changes until the federal-provincial finance ministers meeting in January. This should leave enough time for the necessary legislation to be in place by the start of the 2004-05 fiscal year. However the government did not want to take any chances in light of the uncertain political climate and decided to ensure that payments would be made next year. The government says that the legislation to enact a new equalization program will be retroactive to April 1, 2004.

The major concerns that we have heard this morning about the equalization program include a loss of benefits when provinces develop new resource revenues. That is justifiable, especially when people want their own province to be more self-sufficient, as we have seen in the maritime provinces with the new discoveries of both minerals and gas and oil.

The measures of fiscal capacity and the clawback of benefits previously paid would be determined when the revised data becomes available. If we really examine this whole clawback business, it really does not make any sense. There should be a provision or a transitional formula in there to assist provinces to be self-sufficient.

The provinces are seeking changes that would add $3 billion to the annual costs of the equalization program. The provinces recently learned that as a result of revised economic and population data, close to $1 billion will be clawed back from their equalization plans. That is a lot of money. It is like having a second gun control program.

At the same time, the federal government has indicated that a special one time payment of $2 billion for health care promised last winter may not be made because of the deteriorating federal surplus. If the government makes promises, then it should carry them out. Besides, it was the government's efforts that gutted health care in the first place.

The Progressive Conservative Party supports the bill because eight provinces depend on the federal government for equalization payments which are used to provide programs and services to their residents. Any interruption in these cashflows would imperil provincial obligations. In other words, if bills need to be paid they need to be paid with cash.

I wish the government would take that same attitude toward farmers who need cash, certainly with what was experienced this past summer with BSE on the prairies and across the country, as well as how it impacted on the province of Quebec and the maritimes.

The recipient provinces rely upon the timely arrival of equalization funds for planning their own budgetary process and meeting their bottom line.

This bill is up for debate on short notice, as we know today, and I would like to ask, why all of a sudden are we doing this? As the member from the Bloc indicated, we are supposedly going to rise next week for one reason or another. We are not sure, but we hear rumours in this place. Why all of a sudden are we rushing to put this through?

It certainly shows how important equalization is to the government. It is hard to believe that the government knew that the year was coming up and it waited until the bitter end of Parliament before it brought the bill back to the House to extend the dates.

One must question the timing of this bill, given the internal Liberal leadership politics and an impending election call in early 2004.

We have not gotten to that stage yet because Bill C-49 has not made it to the Senate, and that must take place to change the magic date of August 25, 2004, to April 1, 2004. This extension could be motivated by a desire to free the leader-in-waiting of the Liberal government and the Liberal Party from having to deal with this contentious issue during an election campaign.

Let me take some time and talk about federal-provincial relationships. Let me begin by applauding the Premier of Quebec, Jean Charest, for his vision of creating this new council of Confederation. It is long overdue. As members know, federal and provincial counterparts have been at odds for too long.

Let us examine our history and go back to pre-Confederation. Lower Canada, Upper Canada and the Maritimes were all separate units. They all got together because they wanted to cooperate. They wanted to work together in the best interests of what was half of Canada back in those days and of the people they represented. That is why the history of this country is about cooperative federalism. It is long overdue.

When we look at the record of the Liberals over the last 10 years since they have been in power, there has been little cooperative federalism. It has basically been a dictatorship from Ottawa to the rest of the country.

The attitude of the government has always been that if we do not like it, that is it, take it or leave it. It does not work because we are a country of different provinces and regions. We all have different needs.

That is the reason why equalization started, so that we would all be treated equally in this country. That is a principle of Canadian democracy: equality of citizens. That is why we follow-through with equality of governments, provinces and territories.

This past decade has been full of conflict started by the Liberal government. Let us look at health care. The government created the problem we have today. In 1994 it slashed $24 billion. From 1994 to the present, the Liberal government has not even replaced that $24 billion it took away. Meanwhile, the demands of provincial governments, the health care system, and Canadians have elevated to the point of no return.

What do provinces do when they cannot pay the bills? It not only increased demands on the patient side but also for equipment. It is an impossibility.

We all know that when medicare started we had 50¢ on the dollar. The federal government funded 50% of the program. Today, we are down to 15¢ on the dollar, yet at the same time the federal government wants to dictate how health care should take place in this country. It is paying 15¢ on the dollar and it wants to dictate. It is just unreasonable. If it were paying 50¢ on the dollar, it would sound more reasonable that it should have a 50% share in the decision making, but the government is paying 15¢ on the dollar and it wants to make all the decisions. Basically, it is top down.

In fact, this affects my own riding as I am sure it affects the ridings of most members in this House. In my own particular riding, the provincial government shut down six emergency services from six different hospitals this summer. My riding is over 200 miles long and about 100 miles wide. There is a lot of geography. We do not drive 5 or 10 minutes to a hospital, but hours, literally. People spend hours getting to a hospital and hours waiting for emergency services. This puts people's live at risk.

I know that my constituents are so stressed out because they do not know what to do about it. The problem has been downloaded from the feds to the province and the province seems to be downloading it to the municipalities.

We talk about waste of money. It is pretty realistic to say that Canadians are taxed to death. The provinces fight about how much equalization they should get. But, generally speaking, I do not think we would find too many Canadians who pay taxes who would disagree that they are taxed to death. On the other hand, Canadians do not mind being taxed on the condition that their tax dollars are used wisely on things like health care and creating jobs.

Unemployment is a sore point. There is a surplus of over $40 billion in the EI fund. Canadians cannot understand it and neither can I. It is highway robbery. The government has both hands in the pockets of Canadians.

As members know, a people on employment insurance get back I think 55% of the wage they earned. Perhaps we should raise it to 75%. But to literally steal an extra $40 billion from hardworking Canadians over the last 10 years is not acceptable. We talk about fair play. This is the black hole; this is where all tax dollars come.

There is the $1 billion gun registry. As I said in the justice committee last week, it has gone beyond the argument about registration of long guns. It is about the spending of people's taxes. It is so unfortunate that we collect so much in taxes here and waste so much money. Meanwhile, the services that are demanded by Canadians from coast to coast to coast are neglected.

I would like to comment on highways. Many of us have served in municipal politics. We know how difficult it is to get money from the provincial and federal government for infrastructure development, especially today.

We are concerned about the health of people and clean water. Sewage plants in rural Canada are 50 to 60 years old. They are all breaking down. Small communities need $3 billion or $4 billion to clean up the sludge accumulated over the last 50 years.

Where do people who live in small communities across this country get the money from? All their money is being sent to Ottawa. They do not have the tax base to raise $2 billion or $3 billion to clean out the sludge in their sewage systems or to build $7 million to $10 million or $20 million clean water plants. It is nice to say that Canadians need clean and safe water. But who will pay the bill? That is a frustration Canadians are experiencing across this country.

The roads and bridges are basic infrastructures that have been out there for probably 60 years and they are getting very little dollars, even though the greatest amount of dollars collected come to this place.

Today, on average, we collect $8 billion to $10 billion in gasoline tax. I used to sit on the transport committee when I first came here in 1997. Even the provincial ministers sat down and agreed to what was necessary. I read the report. It was great and reasonable. Basically, it became a dust collector. So, what is the point? There is no point talking because it is beyond talking. It is about helping people.

One of the principle values of the Liberal Party is helping people. I do not think the Liberal Party is helping anybody by the way it operates in this country. The oldest trick in the book is divide and conquer. The Liberals, I would say, wrote the red book on that one because they are skilled experts when it comes to dividing people and conquering them, whether it is at the municipal, provincial or federal levels.

We have gone beyond that. When we talk about equalization, it is time that we get back to basics and talk about how this country came into being. Why were we a Confederation at our birth? The people prior to Confederation lived in Lower and Upper Canada. In effect, they operated as nations of their own at that time.

We need to review and not forget the lessons of why we are what we are. We need to look at basic things like taxation and its purpose. It is not about giving money to one's friends and helping ourselves. It is about helping people.

Mr. Speaker, the bill now before us is another example of the democratic deficit we are now experiencing and which is paralyzing the entire parliamentary machinery.

Bill C-54, in fact, was introduced in order to temporarily extend the current equalization program until March 31, 2005. Why? Because the current government is unable to do its job properly; because the current Prime Minister is living in the shadow of his successor; and because the Liberals do not have the courage to put an end to this scheme.

Why should we prolong the existing equalization program? Because the current Prime Minister is secretly planning to put a sudden end to our work in this House in order to avoid replying to our questions, and because his successor is working behind the curtains and staying out of sight in order to avoid answering our questions. It is so obvious that all the journalists are talking about it. Or maybe the Prime Minister is intending to slip his bill under the Christmas tree that already stands in the main hall of the Centre Block? In any case, I am not sure that the finance ministers from Quebec and the provinces will be pleased with this shopworn present.

Just in passing, let me note that it is not only the department stores that get their Christmas decorations out earlier and earlier. Canada's Parliament is doing it too, even though Hallowe'en has not yet come and gone.

As for the bill at hand, the government intends to get it passed quickly, before we rise, so that the provinces are not penalized. That argument does not hold water. For quite a while now, the provincial finance ministers have been calling for equalization reform. Need we recall that in June of this year, at a meeting in Halifax, the ministers unanimously agreed on the urgency of reforming Canada's equalization system. Clearly put, such a reform is expected to be one means of correcting the fiscal imbalance between Ottawa and the provinces.

For the benefit of people listening to the debate, we should explain what the equalization system is. The public is regularly subjected to volleys of figures and heated exchanges over the operation of the system, but is sometimes pretty much in the dark as to what it really is. I would like to take advantage of this debate, not only to help them understand a little better how the system works, but also to illustrate why an overhaul is long overdue.

The equalization system was put in place in 1957 to ensure that all Canadians and Quebeckers, no matter where they lived, would have access to government services of comparable quality. From west to east, some provinces are very rich whereas others are less fortunate. Provincial governments have to live with the decisions made by the Liberal government, which, under the direction of the member for LaSalle—Émard and future Liberal leader, has put a stranglehold on the provinces andstarved them out.

To bridge the gap between the rich provinces and the poor provinces, Ottawa gives the latter what is called equalization payments. These are cash payments, with no strings attached, which means that the provinces can use that money as they see fit.

Even if the Liberals opposite often talk about federal funding, it is actually our money. It comes from the federal taxes we all pay. That money belongs to all Canadian and Quebec taxpayers, which includes those from the poor provinces. In Quebec, it represents 60% of all our taxes.

It is true that the poor provinces send less money to Ottawa than the rich provinces do. However, the purpose of equalization is just that: to bridge or reduce the gap between the rich and the poor. Equalization is a measure for sharing wealth.

That being said, equalization must not be confused with the Canada health and social transfer, commonly referred to as CHST in our parliamentary jargon.

This transfer payment represents the federal contribution to health, education and social assistance. Since 1993, the year the Bloc Quebecois came to the House, it has constantly condemned the federal government for neglecting its responsibilities in this regard. The federal withdrawal from health has caused the collapse of the health system across the country. The current Liberal government, through its arbitrary decisions, and the future Liberal leader, the hon. member for LaSalle—Émard, pose the greatest threat to the universality of health care. We could talk about this for hours.

Now what about the equalization program and this bill? Over the years, the equalization program has been watered down. As Claude Picher, a columnist with La Presse , wrote, “There is a preposterous complicity underlying the calculations; the program is unstable and abstruse to the point of absurdity”. The dictionary defines abstruse as something bordering on folly.

Instead of immediately undertaking a serious reform of the system, the federal government has decided to spend more time, up to one year, negotiating and passing the equalization bill for 2004-09.

It is mental torture to try to decipher the calculation by which a province is or is not entitled to receive equalization payments. It is torture because entitlement is based on a list of 33 revenue sources, each subject to a series of complex calculations. The list includes sales tax, personal income tax, property taxes, fees and royalties, corporate income tax, taxes on gasoline, tobacco and alcohol, capital taxes and so on.

These complex calculations have numerous deficiencies, which led Mr. Picher to write that only a few rare specialists in all of Canada are able to find their way through this mathematical maze.

If that was Claude Picher's conclusion, it is not surprising that our constituents are totally in the dark.

Once we set aside the squabbling among those provinces not entitled to equalization, like wealthy Alberta, so longingly eyed by the hon. member for LaSalle—Émard, British Columbia and the others, we must focus on the work of federal officials. This is highly technical work, and endless hours are required to play this highly technical shell game. Then there are the endless discussions on how to interpret the mathematical formulas.

It is so complicated that, in 1999, Quebec finance minister Bernard Landry found out while preparing his budget that he could get more money with a technical adjustment. That adjustment would give him $1.4 billion more than expected in equalization payments.

But, oh horror, in 2002, Pauline Marois, the finance minister of the day, received a note indicating that an adjustment to property tax calculations would create a $500 million shortfall in her budget. A bit like a Monopoly game: one year you are high roller, get to pass Go and claim the jackpot, while the next time you have to pay it all back. One year, $1 billion more; the next, $500 million less. How can anyone expect the finance ministers to plan with any degree of certainty?

Moreover, the present Quebec finance minister, author of a report proving the existence of a fiscal imbalance in Canada, is one of those calling for a reform of the equalization payments. He says:

We are expecting a lot of changes... if the mechanism were standardized, the provinces would no longer be at the mercy of the good will of the federal government and of political games.

Instead of preparing to pack up and leave, thus avoiding having to answer our questions and evading political debate, the Liberal government needs to get down to real business. The Prime Minister is quicker at absolving his ministers of allegations of ethical misconduct than at solving real problems.

Do the provinces have to raise the Irving family flag on their legislative buildings before they can get the Prime Minister's attention? The Prime Minister has a mess in his ranks that he needs to clean up, but the mess in the equalization payment system also needs cleaning up.

Recently, the leader of the Bloc Quebecois said the following:

This can mean but one thing: the government does not feel that it possesses sufficient credibility at this time to respond to the provincial governments' call for negotiations. What an admission of weakness. We are being told, “Well now, we can give a year's extension, but that is all we can do”. The orders certainly appear to be coming from elsewhere, that is obvious.

He continued:

This is another example of how the government is completely paralyzed, powerless, and unable to address affairs of the state, because the real prime minister is behind the curtain and the one in power refuses to leave.

I saw something interesting on the news today. As a result of the debate on our motion calling on the Prime Minister to leave as soon as possible after November 14, 2003, we learn that the Prime Minister is believed to entered into talks with his likely successor with respect to leaving earlier. Our motion was defeated, but it has had an impact.

Let us come back to equalization. Currently, in order to establish the threshold for provincial entitlement to equalization, the fiscal capacity of five provinces is taken into account. They are British Columbia, Manitoba, Ontario, Quebec and Saskatchewan. Provinces with a fiscal capacity below the average of these five are entitled to equalization. This is not a representative system, since it excludes Alberta and the four Atlantic provinces and thereby disrupts the balance in determining the average.

The provinces are asking that the formula be changed to take into account the fiscal capacity of all ten provinces. In addition, the payment review mechanism is such that it is very difficult for the provinces to forecast the amount of equalization payment they will be entitled to. Therefore, the provinces are calling on Ottawa to make the payments more predictable.

We are proposing that the adjustments based on new statistics be automatically spread out over three or five years, rather than being required the year in which the statistics change, thereby reducing the volatility of the adjustments. This would avoid the type of situation, which occurred in Quebec and which I described earlier.

The provinces also want the calculations for the program, which has 3,000 variables, to be simplified to ensure greater transparency. They are also asking that all general revenues, not just some of them, be included to better reflect reality.

Along the same lines, they are asking that the calculation be reviewed for some of the 33 sources of revenue that are currently used to determine the provinces' fiscal capacity. All this clearly illustrates the work that needs to be done to clean up this mess.

The government's attitude, or rather the Liberals' stubborn insistence on making the wheels of government move exceedingly slow, is a dangerous nuisance. Instead of negotiating a reform of the equalization program with the provinces, the government is introducing a bill to maintain the status quo and shirk its responsibilities.

We have good grounds to believe that there will be a general election next spring, just when the current equalization agreement is supposed to come to an end. Since issues and interpersonal conflicts are making relations between the Prime Minister and his successor rather tense, the government has decided to play it safe, that is to extend the current agreement and avoid one of its responsibilities, which is to reform equalization.

Throughout this debate, we will have the opportunity to spotlight the report of the Séguin commission on fiscal imbalance. Need I remind the House that Mr. Séguin is the new Quebec finance minister. His report concluded, among other things, that we need to restore fiscal balance, improve equalization, put checks and balances on the federal spending power and prevent any future cause for imbalance.

In conclusion, let me add that if we were sovereign, if the taxes we pay in Quebec stayed in Quebec, we would not have to deal with this whole mess.

Mr. Speaker, I appreciate the chance to speak to Bill C-54, an act to amend the Federal-Provincial Fiscal Arrangements Act.

Let the record show that the parliamentary secretary does not know the answer to the hon. member's question about what year. It is pretty obvious.

At any rate, this is an important issue. I am happy to weigh in on the debate. Many Canadians are curious about why at this stage in the cycle of equalization the government is bringing in amendments that would extend the current fiscal arrangements between the federal government and the provinces for another year. Why at this point would the government be doing this? This is almost without precedent. In fact, I think it is without precedent at least in this form. I think the question is why.

A minute ago the parliamentary secretary was saying that extending the current formula and the agreement for another year is insurance. I understand that argument. We are not arguing against taking that step. He argued that it is prudent to do it. In a sense he is correct, but it is only prudent because the federal government did not get an agreement with the provinces over the last four and one-half years.

The government has had all kinds of time to come to an agreement, but it failed to do it. That in itself was not prudent. Now the government has come to a point where we have to rush the bill through to ensure that the provinces have comparable services, if they do not have the fiscal capacity to provide them themselves, through equalization. This is a program that the official opposition supports. In this case we have concerns about how the bill is being rammed through.

Later on I will speak in some detail about some of the changes we would like to see to equalization. However, I do think the government should be taken to task. A minute ago the parliamentary secretary said that the Prime Minister and the finance minister have had very good meetings with their counterparts in the provinces. That is fine, but it is a little late in the year to get to this point where now we have to ram through something that by anyone's admission is not acceptable to the provinces.

The provinces are unhappy with this formula. However, because the government dithered for so long we are in a position where we now have to bring forward this unprecedented legislation to ensure that in fact equalization payments can continue, so we can provide basic services in those provinces where they do not have the capacity to provide them themselves.

The official opposition is very critical of the government's performance. It points to a deterioration in the relations between the federal government and the provinces over the last many years. Over and over again we see provincial elections where the campaign is more and more about improving relations with the federal government. This bill is just one more example.

I want to speak about some of the concerns that we have about the actual equalization formula as it is today. Many provinces have big concerns about the formula.

Not long ago on television I was watching the new premier of Newfoundland, Danny Williams, talk about the concerns in Newfoundland about the formula. He pointed out that oil and gas has created about $14 billion in revenue out of Newfoundland, but what is the net positive effect for Newfoundland? It is $300 million. Why is that? It is because, unbelievably, the equalization formula today claws back almost every dollar that comes out of non-renewable natural resources.

Let us think about that. Non-renewable natural resources are resources that cannot be renewed, unlike hydro and other types of resources, forestry for instance, that are renewable. Once those resources are gone, they are gone.

In its wisdom, or lack of wisdom, in the past the federal government has insisted that every dollar that comes out of non-renewable resources be clawed back. A province such as Newfoundland which is trying very hard to get on its feet and be a net contributor to the equalization formula cannot do it or it is impeded by the current formula. That has to change.

We have to extend a hand to provinces like Newfoundland and Nova Scotia which have resource wealth and ensure that when they start to develop those resources, they are not penalized by an equalization formula that claws back virtually every dollar they get from the development of those resources. That is completely unfair. That has to change.

It is not only Newfoundland and Nova Scotia that have concerns. Many other provinces have big concerns about the equalization formula as it is today.

In British Columbia people have concerns about the fact that property values are calculated as a way of determining the relative wealth of a province and that figures into whether or not they should get equalization payments. In Vancouver there are very high property values and very high property taxes as a result of that. That is not necessarily an indicator of how well the province is doing economically. British Columbia has struggled over the last number of years, but it still has very high housing prices. As a result of that, it probably does not end up in a situation where it would get equalization where otherwise it would. I know British Columbia wants to see that change. We support those kinds of discussions.

There is a lot of interest and a lot of people are saying that maybe we should change from a five province formula to a 10 province formula so that we get a better sense of what the actual average standard of living or capacity to provide services to the public really is. The five province formula which measures the relative capacity of the five provinces in the middle of our 10 provinces to provide those services may not be a very good indicator of actual capacity to provide services. We favour a debate about going to a 10 province formula.

Let me emphasize again that my party supports equalization. It is part of our constitution. As an Albertan, my province contributes more than any other province per capita to equalization. I always say that I think Albertans are probably more patriotic than any other citizens. I say that because they have to pay a pretty high admission fee to be in Confederation. We pay a lot of money into Confederation.

Other provinces, and I am not knocking them, are net recipients and that is fine. However, I do like to point out, when people say that Albertans are sometimes a little standoffish about Confederation, that we pay a very high price to be in Confederation. We are happy to be Canadians. It is also important that others recognize that Alberta pays a tremendous amount of equalization into Confederation to ensure that other provinces have services that are comparable to the national average.

Having said all of that and that I favour equalization, I want to point out that equalization is really a safety net. It is like a social program in a sense. It provides a safety net to ensure that no province gets itself into a situation where it cannot provide basic services. The Canadian Alliance believes, the official opposition believes, that no matter where we go in the country we should be able to get good health care. To me that makes sense. I think Canadians agree with that. We should be able to get all kinds of government services that are important to the proper running of a society. We believe in that. We have no problem with equalization. It should be there.

I think all members in the House would agree that the ideal would be that every province would eventually get to the point where it had the fiscal capacity to provide those services on its own, without the need to rely on equalization. That should be the goal. I would like to say that we are getting closer to that, but unfortunately we are not. I do not know if members have had the chance to read some of the newspapers today that pointed to the fact that Canada is falling further and further behind in its capacity to compete in the world.

I do not know if members realize this but in 2001 Canada was third in the world on the global competitiveness scale as produced by the World Economic Forum out of Geneva. Today, two years later, we have fallen to sixteenth place, from third to sixteenth. Why is that? Is it because we have had some big natural disaster that has set us back? No, according to the World Economic Forum it is because of government policies.

While we are having a debate today about equalization, I am going to argue that the most important way to help Canadians is not through equalization, it is through a strong vibrant economy that is more and more competitive, because we are in a global competition. Unfortunately, however, the government, despite its rhetoric about wanting to improve our capacity to be innovative and to compete, has failed utterly and completely to address those problems. That is why we have fallen from third to sixteenth in two years.

I want to quote from this morning's Globe and Mail , which in turn is quoting from the report:

Canada's quick fall can be traced mainly to “a perceived decline in the quality of public institutions”.

It goes on to say:

As well, Canada fell to 24th this year from ninth last year on the forum's public institution sub-index, which compares countries based on how conducive to business competition their governments and other public institutions are.

It goes on and on and talks about how Canada has failed to address some of the big problems that it needs to address to ensure that our country is more competitive.

When we talk about being more competitive, we are not just talking about businesses competing. We are talking ultimately about the ability of a country to provide a higher standard of living for its citizens. That is what government should be focused on.

It is one thing to talk about rearranging the wealth we have, which is what equalization does. It is quite another thing to talk about making the pie bigger, creating more wealth and ensuring that Canadians not only have access to that wealth but that they have access to the jobs that allow people to exercise their great talents and God-given abilities. Unfortunately in Canada today with an 8% unemployment rate, that is not an option open to millions of Canadians. They are unemployed as a result of poor public policy and lack of planning that comes from the government.

The current finance minister has failed to meet the challenges that have been laid before him, despite all the talk about wanting to address those things. The industry minister and the human resources minister headed up an initiative that was designed to address our competitiveness and innovation challenges. Rather obviously they failed.

I am not going to let the former finance minister off the hook either. He was here in 2001 when we were ranked third. By 2002 we had fallen way down the ladder, and if I remember correctly it was right down to eighth or ninth. The new Liberal leader who wants to become the prime minister was in charge at the time. He cannot escape unscathed when it comes to ensuring that someone is held to account for this wretched performance by our economy. The blame for this has to fall squarely at the feet of the new Liberal leader. He has failed utterly and completely to address these issues.

He gave a speech in Montreal the other day. He laid out some of his vision for addressing these kinds of problems. One of the problems with the speech was that he had about a $50 billion hole in his accounting as to how he would pay for all of the things.

The report that I have been referring to talks about the credibility problems of public officials. It specifically talks about the credibility problems of public officials in Canada. I want to argue that the new Liberal leader, the soon to be prime minister, the member for LaSalle—Émard, the former finance minister, has a massive credibility problem. He is contributing to this fall in Canada's competitiveness versus other countries.

All of this is more than just an academic debate. It is not an abstract debate. It has to do with the ability of government to provide good, well paying jobs for ordinary rank and file Canadians, for people to grow up in this country and pursue their dreams.

For many people, unlike when I grew up, it is very difficult to simply step out of high school and find a good job. They have to go to university and even then it becomes difficult. Many Canadians end up going elsewhere to find jobs. That is unacceptable.

There are many people in this place who have families that have moved elsewhere in the world. Many of them have moved to the United States but not only there. They have left in some cases to go to Ireland and other countries because that is where the opportunities are for them in their particular fields. It is time that, as a Parliament, we start getting serious about addressing our competitiveness in the world.

The debate we are having today is about equalization, but the greatest help that we can provide to Canadians is not to redistribute income. The greatest help we can give is to create an economy that is conducive to attracting investment, that creates jobs and gives people some real hope. That is not what is happening in Canada today. We are falling further and further behind.

Some people say we are measuring ourselves against the United States. It is true that we have fallen behind in terms of our ability to compete against the United States. Our standard of living versus the United States has fallen dramatically. Even the current finance minister, when he was industry minister, pointed out that the standard of living in Canada had fallen to the point where it was now equal with the poorest of the poor American states like Mississippi, Alabama and Georgia. That is a shame, given the wealth that we have as a nation and the fact that we have unfettered access to the wealthiest market in the world, the United States.

It is not just the United States we are falling behind. We have fallen behind the Finns, the Danes, the Swiss, the Dutch, the Irish and the Icelanders. They are all surpassing us. Why are they doing it? Is it because they have all kinds of resources that we do not have? Obviously not. In Iceland, there are hardly any resources. It is because Iceland makes better public policy decisions.

What we will find when we look at all of those countries I have mentioned is that they have reduced their taxes dramatically, to the point where they are attracting investment from all over the world. This allows them to create businesses that provide jobs and incomes for millions of their citizens.

We need to be doing the same. If Ireland, in the middle of the North Sea, can do it with no resources, surely Canada can do it, with its massive resources sitting atop the United States with an $11 trillion economy and the wealthiest economy the world has ever known.

However, we keep falling further and further behind thanks to poor public policy planning on behalf of the Liberal government, the former finance minister, the current finance minister and the current Prime Minister. They are all in it together. It is a disgrace. It is a lost decade. It is a poor legacy for the Prime Minister who will be departing soon.

In closing, this debate has been about equalization. We want to see changes made to equalization and we want to see equalization continue, but we cannot make that our focus. Our focus must be on creating an economy where Canadians can have good, well paying, long term jobs. That is the real answer in helping people in all parts of this country achieve their goals ultimately to live fulfilled lives.